LR cointegration tests when some cointegrating relations are known

Paolo Paruolo

Economics and Quantitative Methods from Department of Economics, University of Insubria

Abstract: This paper considers the asymptotic analysis of the likelihood ratio (LR), cointegration (CI) rank test in vector autoregressive models (VAR) when some CI vectors are known and fixed. It is shown that the limit law is free of nuisance parameters. In the case of LR tests against the alternative of completely unrestricted CI space, the limit law can be expressed as the convolution of known distributions. This deconvolution is employed to approximate the quantiles of the distribution, without resorting to new simulations.

Keywords: cointegration; likelihood ratio; unit roots (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ins:quaeco:qf0106

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